Time for action as disaster risks rise, insurer says

Australia's exposure to natural risks is on the increase and governments at all levels should step up joint efforts to limit the losses and prevent insurance costs from spiralling higher, one of the country's biggest insurers says.

Modest investments in flood or fire mitigation measures can significantly reduce the cost of the disasters when they inevitably occur, Suncorp Group said in its Risky Business report on risk management.

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Much of Australia remains gripped in record heatwave conditions. The mercury climbed to up an average maximum of 40.33 degrees on Monday - smashing a 40-year record - and probably exceeded that rate on Tuesday, the Bureau of Meteorology said. Similar heat may last for days, keeping fire conditions extreme or higher in many regions

Insurers continue to tally the cost of the bushfires across south-eastern Australia.

The Insurance Council of Australia said that as of this morning some 420 claims for losses had been lodged for the fires in Tasmania, with insured losses estimated to be $42 million so far.

The losses in Tasmania range from destroyed homes to holiday shacks and small businesses, with assessors continue to inspect damage, said Campbell Fuller, a spokesman for the ICA.

So far, other states have avoided fire losses of the same scale even as conditions for fire remain extreme across large regions of the country.

‘‘At this point, we’ve had no significant property losses’’ in NSW, Mr Fuller said, adding that the ICA is monitoring fire events closely.

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Taking steps

The Suncorp report said governments could assist with fire-risk reduction through fuel-load management, prescribed burning and fire breaks. Households, though, had a perhaps bigger role to play by installing fire defence systems and clearing vegetation such as tall trees close to their homes.

It cited findings of the Special Inquiry into the 2011 Perth Hills Bushfire, which heard evidence that evaporative air conditioners were particularly prone to an ember attack unless retrofitted with screens costing less than $500.

Suncorp last year stirred public anger in parts of Queensland for deciding to “red-line” or halt sales of new insurance policies in the outback towns of Roma and Emerald because of repeated flooding events.

While the current bushfires in several states are resulting in localised, temporary embargoes on new insurance sales – a policy typically imposed by Suncorp, IAG and other insurers as a fire or other disaster event looms – the company has no plans to extend “red-lining” to fire-prone regions.

“Floods are a bit more predictable than a bushfire,” said Chris Newlan, Suncorp's head of public policy and corporate affairs. A flood is “caused by a natural event that can be mapped over time. A bushfire can be started by a couple of 16-year-olds on school holidays,” he said.

The issue of taking preventative measures to limit later disaster costs can best be seen in the case of Roma, which put off plans to build a $2 million levee seven years ago, said Mark Milliner, chief executive of personal insurance at Suncorp and the president of the Insurance Council of Australia.

“Broadly it's cost $500 million for the government and private sector over those seven years,” Mr Milliner said.

While other insurers kept selling new insurance policies in Roma and Emerald, Queensland-based Suncorp wanted to send “a very clear message to governments that mitigation had to be a priority”, Mr Newlan said.

The company has lately been told that the message has got through with the state government planning to guarantee funding for the Roma levee and Emerald taking other steps to reduce the risk of future flooding.

Suncorp officials will inspect both towns next month and review its embargo, although any resumption in insurance sales may have to wait.